<PAGE> 1
Mailing Address:
SAFECO Mutual Funds
P.O. Box 34890
Seattle, WA 98124-1890
For Account Information
or Telephone Transactions:
Nationwide: 1-800-624-5711
Seattle: 545-7319
TTY/TDD: 1-800-438-8718
SEMIANNUAL
REPORT
MARCH 31, 1995
SAFECO
Stock Funds
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Income Fund
SAFECO Northwest Fund
[SAFECO LOGO]
MUTUAL FUNDS
<PAGE> 2
PERFORMANCE INFORMATION
For the Periods Ended March 31, 1995 (Unaudited)
SAFECO GROWTH FUND - SAFECO EQUITY FUND - SAFECO INCOME FUND
Illustration of a $10,000 investment over the past ten years
[CHART]
Chart showing the value of a $10,000 investment in the SAFECO Growth
Fund, SAFECO Equity Fund and SAFECO Income Fund as of March 31, 1995 as
compared to the S&P 500 Index (with Dividends).
TABLE OF CONTENTS
<TABLE>
<S> <C>
President's Letter 2
SAFECO Growth Fund 3
SAFECO Equity Fund 8
SAFECO Income Fund 13
SAFECO Northwest Fund 19
Financial Statements 24
Notes to Financial Statements 28
</TABLE>
The performance of the Funds assumes the reinvestment of all dividends
and capital gains. The Standard & Poor's 500 Index is an unmanaged index of 500
stocks weighted by market capitalization; the index has been adjusted to reflect
reinvestment of dividends on securities in the index. The Murphey Favre
Northwest 50 Index(TM) is an index of 50 Northwest companies weighted by their
regional impact.
Operating expenses have been applied to the Funds, but not to the
indices. If portfolio operating expenses had been applied to the indices, their
values would have been lower. Investment returns are historical and not
predictive of future performance.
<PAGE> 3
<TABLE>
<CAPTION>
SAFECO NORTHWEST FUND
Illustration of a $10,000 Investment
[CHART]
Chart showing the value of a $10,000 investment in the SAFECO Northwest
Fund as of March 31, 1995 as compared to the Northwest 50(TM) Index (with
Dividends) and the S&P 500 Index (with Dividends).
10 YEAR OR
AVERAGE ANNUAL TOTAL RETURN 1 YEAR 5 YEAR SINCE INCEPTION
<S> <C> <C> <C>
SAFECO Growth Fund 6.80% 11.13% 11.35%
SAFECO Equity Fund 15.28% 14.83% 15.57%
SAFECO Income Fund 10.39% 9.08% 11.13%
S&P 500 Index 15.54% 11.41% 14.44%
SAFECO Northwest Fund 5.68% N/A 8.56%*
Northwest 50(TM) Index 5.45% N/A 8.78%
S&P 500 Index 15.54% N/A 11.09%
</TABLE>
*Inception date of the Fund was February 7, 1991.
Index graph comparison begins on February 28, 1991.
- 1 -
<PAGE> 4
LETTER FROM THE PRESIDENT
May 1, 1995
DEAR SHAREHOLDERS:
Nineteen ninety-four proved to be a trying year for investors. The stock
market posted below-average returns, and the bond market suffered one of its
worst years in history. So far this year, we have seen an improved picture, as
both the stock and bond markets have shown renewed strength.
A significant factor in last year's disappointing markets was the perceived
threat of inflation. Much of the strength we have seen this year is due to
optimism that inflation is in check. Our view is that, while inflationary fears
are moderating, they are still present. Because of this, we suspect interest
rates will hold in a fairly narrow range for the remainder of 1995.
Inflationary pressures will continue to affect the stock market as well.
Corporate profits will also be a significant factor: stronger earnings will bode
well for stocks, weaker earnings may bring disappointments.
While we do not profess to know which direction the market will turn in the
short term, it is interesting to note that the gains the market experienced in
the first quarter -- as measured by the S&P 500's gain of 9.73% -- is nearly
equal to the stock market's long-term average annual gain.
As usual, we caution that predicting short-term trends and successfully
moving in and out of the markets is difficult, at best. While there is money to
be made in the bond and stock markets, we believe it is best made over the long
run. Indeed, the turns the markets have experienced these past 15 months
reinforce the notion that investors need to make decisions with a long-term
horizon: those who had charted an extended course, and stayed with it through
these difficult markets, reaped the gains of the first quarter of 1995.
For those investors with shorter-term goals, there are money market funds --
shorter-term, steadier investments which pay a respectable yield while aiming
for stability of principal. For those of you wishing to know more about our
basic philosophy of investing, we have prepared a small booklet, the SAFECO
Mutual Funds Personal Investment Guide. Call us at 1-800-426-6730 for your free
copy.
[PHOTO]
David F. Hill
As always, we truly value your continued confidence in SAFECO Mutual Funds.
Sincerely,
/s/ David F. Hill
David F. Hill
- 2 -
<PAGE> 5
REPORT FROM THE FUND MANAGER
SAFECO GROWTH FUND
May 1, 1995
The SAFECO Growth Fund returned 6.80% for the 12 months ending March 31,
1995. Meanwhile, according to Lipper Analytical Services, the average growth
fund grew 8.81% and the Russell 2000, a proxy for smaller stocks, returned
5.50%. (The fund returned 5.18% for the six months just ended.)
For the 12 months ended March 31, we were 2.01% behind the average growth
fund. For the 12 months ended September 30, 1994, we were 2.30% ahead. In the
most recent run, we had a difficult time. In the long run, I believe it will all
even out to the positive.
The Fund underperformed in part because it is underweighted in technology
stocks, which I am not comfortable holding at this time. Consequently, when
semiconductor stocks had their outstanding run during the first quarter, the
fund underperformed.
The peso's free-fall also hurt the Fund. Our substantial position in
TELEFONOS DE MEXICO (6.3% of net assets on September 30, 1994) dropped 55% with
the currency's crash. I sold the position as it became clear the peso's recovery
would be prolonged.
CATALINA LIGHTING, ANESTA (drug dispensing) and TELEPANEL SYSTEMS (bar
coding), all small positions, all fell on poor earnings. CYGNE DESIGNS, a
private label apparel manufacturer, suffered from the general malaise in retail.
(HAROLD'S STORES, a southern retailer I began buying late in 1994, was immune to
retail's maladies and climbed 11.1%.)
TAKING PROFITS FROM BIG POSITIONS
As CALLAWAY GOLF stock became more expensive and our position grew larger and
larger, I became increasingly uncomfortable holding it. And so, I sold it all.
Callaway ended the quarter 11.9% below where we sold it.
I began selling ROBERTS PHARMACEUTICAl for the same reason: The stock had
grown too expensive to merit so big of a position in our Fund. I had sold about
half the position when Roberts share price dropped almost 30% on the news it
would not meet its earnings estimates. Now that the position is both cheaper and
smaller (3.3% of net assets) and all the positives are still there, I'm very
comfortable holding it. Despite the terrible blow to its share price, we made
20.5% on Roberts in the past six months.
When HEALTH SYSTEMS INTERNATIONAL announced its merger and the stock was up
24.9%, I sold the entire position. Six months ago it had been our eighth largest
holding.
Gains from what was our ninth position, the pawnshop chain EZCORP, have been
slower in coming than I anticipated. I sold down the position, at a loss,
choosing to wait with a smaller stake. And, taking profits, I took MICROS out of
the top ten. This electronic cash register company that's done so well for us,
remains in the portfolio at 2.1% of net assets.
NEW NUMBER ONE
CANANDAIGUA WINE gained 25.4% over the six months to comprise 9.7% of net
assets. I liked this company at $15 and I love it at $42. Canandaigua grows by
acquisition and is currently the only buyer of wine and spirits businesses. The
power to buy at their price, coupled with their cost cutting, financial and
marketing skills, are making this a great stock.
(Continued on next page.)
- 3 -
<PAGE> 6
REPORT FROM THE GROWTH FUND MANAGER (CONTINUED)
There were good gains in financial stocks during the six-month period. GREEN
TREE FINANCIAL was up 52.6%. We're holding 9.6% of net assets in this financier
of mobile home sales. OLYMPIC FINANCIAL is a company that funds auto loans. We
made 62% on this stock in the last six months and it increased to 1% of net
assets.
Credit card protector SAFECARD SERVICES contributed 21.9% over the six months
just ended. At period end, I'd reduced the position by about one-third to 4.9%
of net assets. (I have since then completely eliminated the position.)
My largest purchase of the period made PHILIP MORRIS our third largest
holding at 5.5% of net assets. I think "Mo" will be the growth stock of the
nineties. It has great cash flow, a very low valuation and is up 8.3% since we
bought it.
THORN APPLE VALLEY was off over 20% due to high hog prices. Though the stock
is down, I'll continue to hold it. Management is good and the cycle will turn.
We are holding 3.7% of net assets in MARK IV, the well-run conglomerate of
auto-related companies. While this company has a history of being able to grow
through all economic cycles, it's been off slightly over the last six months.
LANDAUER, a company that I've held for some time, grew 12.3% to become one of
our top ten holdings. The company produces equipment that measures radiation
exposure.
PATIENTLY SHOPPING FOR GROWTH
[PHOTO]
[THOMAS M. MAGUIRE]
I began buying MAXXIM MEDICAL, purveyor of surgical procedure trays, in the
fourth quarter. This company, which grows by acquisition, has grown 19.3% for us
to 3.1% of net assets.
I've also bought MEDEX, a supplier of programmable infusion pumps that
regulate the dosage of drugs given intravenously. And, I bought SHAW INDUSTRIES,
a premier carpet manufacturer that should do well when housing starts and
turnovers pick up, and POLARIS INDUSTRIES, a manufacturer of snowmobiles, jet
skis and all-terrain vehicles with tons of cash.
I've actually shopped more than I've bought lately, which has caused us to
accumulate 9% cash. At today's cash yields, I haven't minded waiting for better
prices.
/s/ Thomas M. Maguire
Thomas M. Maguire, Growth Fund Manager
Tom Maguire began his stock picking career working at Seattle Garden
Center and, after 14 years at SAFECO, still specializes in growth. Completing
his M.B.A. at the University of Washington, Maguire joined the company as an
equity analyst and is today, a Vice President. From 1984 to 1989, he co-managed
the SAFECO Equity Fund.
- 4 -
<PAGE> 7
HIGHLIGHTS
SAFECO GROWTH FUND
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
TOP TEN HOLDINGS PERCENT OF NET ASSETS
=====================================================
<S> <C>
Canandaigua Wine Co. 9.7%
(Wine Manufacturer/Distributor)
Green Tree Financial Corp. 9.6%
(Manufactured Home Financing)
Philip Morris Cos., Inc. 5.5%
(Food, Beverage & Tobacco Company)
Safecard Services, Inc. 4.9%
(Credit Card Services)
Thorn Apple Valley, Inc. 3.9%
(Pork Slaughter House & Meat Packer)
Mark IV Industries, Inc. 3.7%
(Diversified Manufacturer)
Roberts Pharmaceutical Corp. 3.3%
(Pharmaceutical Company)
Maxxim Medical, Inc. 3.1%
(Surgical Procedure Trays)
Shaw Industries, Inc. 3.0%
(Carpet Manufacturer)
Landauer, Inc. 2.8%
(Radiation Measuring)
- - -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES (SEPT. TO MARCH) COST
=====================================================
<S> <C>
Philip Morris Cos., Inc. $7,832,800
Shaw Industries, Inc. 5,080,815
Maxxim Medical, Inc. 3,992,849
Polaris Industries, Inc. 3,747,113
Medex, Inc. 3,242,200
- - -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES (SEPT. TO MARCH) PROCEEDS
=====================================================
<S> <C>
*Callaway Golf $17,487,377
*Health Systems International, Inc. 8,851,584
Roberts Pharmaceutical Corp. 6,157,715
Ezcorp, Inc. 4,865,625
*Telefonos De Mexico, S.A. (ADR) 4,463,366
- - -----------------------------------------------------
</TABLE>
*Security sold, no longer in portfolio.
<TABLE>
<CAPTION>
TOP FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
=====================================================
<S> <C>
*Netcom Online 66.1%
(Internet Provider)
Olympic Financial, Ltd. 62.0%
(Auto Loans)
*Ren Corp. USA 56.4%
(Kidney Dialysis Centers)
Renters Choice, Inc. 55.0%
(Rent-To-Own)
Green Tree Financial Corp. 52.6%
(Manufactured Home Financing)
- - -----------------------------------------------------
*Security sold, no longer in portfolio.
</TABLE>
<TABLE>
<CAPTION>
BOTTOM FIVE PERFORMERS
(SEPT. TO MARCH) PERCENT RETURN
=====================================================
<S> <C>
*Telefonos De Mexico, S.A. (ADR) -54.7%
(Mexico's Telephone Company)
Cygne Designs, Inc. -47.8%
(Apparel Manufacturer)
Catalina Lighting, Inc. -47.4%
(Lighting Fixture Supplier)
Anesta Corp. -43.7%
(Drug Dispensing)
Telepanel Systems, Inc. -42.9%
(Electronic Pricing and Information Systems)
- - -----------------------------------------------------
</TABLE>
*Security sold, no longer in portfolio.
- 5 -
<PAGE> 8
HIGHLIGHTS
SAFECO GROWTH FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
[PIE CHART]
SAFECO GROWTH FUND
Net Asset Capitalization Weightings
As a Percent of Net Assets as of
March 31, 1995
1. Large: 24.5%
($1 Bil. and above)
2. Medium: 22.4%
($500 Mil. - $1 Bil.)
3. Small: 42.9%
(Less than $500 Mil.)
4. Cash & Other Assets
Less Liabilities: 10.2%
[GRAPH]
SAFECO GROWTH FUND
Top 5 Industries as a Percent of Net Assets
As of March 31, 1995
Graph showing the following:
Food & Tobacco: 19.1%
Financial Services: 18.5%
Drugs & Hospital Supplies: 9.4%
Manufacturing: 5.0%
Auto & Auto Parts: 4.2%
PORTFOLIO OF INVESTMENTS
SAFECO GROWTH FUND
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
=========================================================
<S> <C>
COMMON STOCKS - 89.8%
APPAREL MANUFACTURING - 3.3%
43,000 *Cygne Designs, Inc. $ 505
343,200 -Shaw Industries, Inc. 4,547
AUTOS & AUTO PARTS - 4.2%
100,000 -Federal-Mogul Corp. 1,800
45,000 *Miller Industries, Inc. 776
50,000 *Monaco Coach Corp. 800
303,000 *Schwitzer, Inc. 3,106
BROADCAST MEDIA - 0.4%
106,000 *Children's Broadcasting Corp. 676
BUILDING MATERIALS - 1.8%
95,000 *-BMC West Corp. 1,377
42,000 *-Fibreboard Corp. 1,323
COMMERCIAL SERVICES - 1.6%
116,000 -Renters Choice, Inc. 1,798
67,000 *-Youth Services International, Inc. 628
COMPUTER SOFTWARE - 0.1%
140,600 *Telepanel Systems, Inc. 211
COMPUTER SYSTEMS - 2.7%
104,500 *MICROS Systems, Inc. 3,292
35,000 *-Seagate Technology, Inc. 976
CONSUMER PRODUCTS & SUPPLIERS - 1.5%
243,400 *Catalina Lighting, Inc. 1,521
127,000 *Celebrity, Inc. 826
DRUGS & HOSPITAL SUPPLIES - 9.4%
85,000 *Anesta Corp. 425
32,500 *-Aprogenex, Inc. 191
331,300 *-Maxxim Medical, Inc. 4,763
301,600 -Medex, Inc. 3,318
45,000 -Penederm, Inc. 309
183,600 *Roberts Pharmaceutical Corp. 5,049
96,300 *Span America Medical Systems, Inc. 433
- - ---------------------------------------------------------
</TABLE>
* Non-income producing security.
+ Affiliated issuer as defined by the Investment Company Act of 1940 (the
Fund owns 5% or more of the outstanding voting shares of the company).
- - - New to Portfolio since last Report.
See Notes to Financial Statements
- 6 -
<PAGE> 9
PORTFOLIO OF INVESTMENTS
SAFECO GROWTH FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
<S> <C>
ELECTRICAL EQUIPMENT & ELECTRONICS - 2.3%
275,000 *Intera Information Technologies Corp. $ 756
275,000 *LTX Corp. 1,616
40,100 *Silicon Valley Group, Inc. 1,128
ENGINEERING/CONSTRUCTION - 0.7%
100,000 *-ACMAT Corp. (Class A) 1,150
FINANCIAL SERVICES - 18.5%
16,885 *Alleghany Corp. 2,617
359,000 Green Tree Financial Corp. 14,719
168,600 *Olympic Financial, Ltd. 1,518
396,900 Safecard Services, Inc. 7,591
74,800 *World Acceptance Corp. 1,954
FOOD & TOBACCO - 19.1%
355,300 *Canandaigua Wine Co. 14,923
130,000 -Philip Morris Cos., Inc. 8,483
313,000 +Thorn Apple Valley, Inc. 6,025
HEALTH CARE SERVICES - 2.1%
120,000 *Amrion, Inc. 1,095
119,500 *Res-Care, Inc. 2,091
HOUSEHOLD PRODUCTS - 0.6%
150,000 *Media Arts Group, Inc. 956
INSURANCE - 0.5%
33,700 Equitable Cos., Inc. 741
LEISURE TIME - 3.5%
27,000 *Bollinger Industries, Inc. 230
154,000 *Mikohn Gaming Corp. 1,309
81,800 -Polaris Industries, Inc. 3,947
MANUFACTURING - 5.0%
65,000 Furon Co. 1,251
276,250 Mark IV Industries, Inc. 5,663
164,500 +*Speizman Industries, Inc. 740
OFFICE EQUIPMENT & SUPPLIES - 1.7%
197,000 *-Day Runner, Inc. 2,647
POLLUTION CONTROL - 4.3%
180,000 *Growth Environmental, Inc. 585
232,000 Landauer, Inc. 4,234
188,500 *Serv-Tech, Inc. 1,649
RESTAURANTS - 0.7%
131,500 *Pollo Tropical, Inc. 1,101
RETAIL - 4.1%
100,000 -Damark International, Inc. 700
236,550 *Ezcorp, Inc. 1,774
189,970 *Harold's Stores, Inc. 1,971
284,500 *Tuesday Morning Corp. 1,743
SHOES - 0.4%
37,000 *K-Swiss, Inc. 555
TRANSPORTATION - 1.3%
141,000 *Interpool, Inc. 2,044
--------
TOTAL COMMON STOCKS 138,156
--------
SHORT-TERM INVESTMENTS - 4.6%
INVESTMENT COMPANIES:
$7,039,096 Short-Term Investments Co.
(Prime Portfolio) 7,039
--------
TOTAL SHORT-TERM INVESTMENTS 7,039
--------
TOTAL INVESTMENTS - 94.4% 145,195
Other Assets, less Liabilities 8,651
--------
NET ASSETS $153,846
========
- - ------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- 7 -
<PAGE> 10
HIGHLIGHTS
SAFECO EQUITY FUND
As of March 31, 1995(Unaudited)
[PIE CHART]
SAFECO Equity Fund
Net Asset Capitalization Weightings
As a Percent of Net Assets as of
March 31, 1995
1. Large: 55.7%
($1 Bil. and above)
2. Medium: 12.0%
($500 Mil. - $1 Bil.)
3. Small: 26.0%
(Less than $500 Mil.)
4. Cash & Other Assets
Less Liabilities: 6.3%
[GRAPH]
SAFECO Equity Fund
Top Five Industries as a Percent of Net Assets
As of March 31, 1995
Bank Graph showing the following:
Banking & Finance: 9.8%
Food & Tobacco: 8.8%
Real Estate Investments
Trusts: 8.3%
Utilities-Telephone: 8.0%
Computer Software: 5.9%
REPORT FROM THE FUND MANAGER
SAFECO EQUITY FUND
May 1, 1995
Returning 15.28% for the 12 months ended March 31, 1995, the SAFECO Equity
Fund outpaced its peer group. According to Lipper Analytical Services, the
average growth and income fund produced a 10.35% return for the 12 months just
ended. (The Fund returned 3.90% for the six months just ended.)
The Equity Fund's performance cooled somewhat during the first quarter of
1995 and would have slowed no matter who was at the helm. The Real Estate
Investment Trusts (REITs) that were added for yield in 1994 did well during the
fourth quarter, but fell in the first quarter of '95 -- 10 of the 11 REITs we
hold ended the period down. I'm currently reviewing the REITs to make sure those
we keep have growth potential as well as yield.
I said a quick adios to our Mexican holdings when the peso fell. All the
Mexican companies we sold ended the quarter further south than where we parted.
With earnings beginning to slow, I felt CALLAWAY GOLF didn't deserve to be
our largest holding anymore, so I sold the position down to 1.5% of net assets.
The move proved fortuitous; Callaway ended the first quarter down 15%.
I also sold 25 other positions, which accounted for less than 9% of the
portfolio. We began the quarter with 87 names and ended it with 67, getting
closer to a number of companies that I feel I can closely follow.
To me, the most important aspect of managing the Fund is understanding the
companies that comprise it. My preference is for larger, established companies
that I know and would be happy holding for years. In general, I am looking for
companies with growth potential and generous dividend income, that are selling
at a discount.
- 8 -
<PAGE> 11
MONEY IN THE BANKS
Our biggest purchases were in banking and finance. This industry -- hurt in
1994 by rising interest rates -- was left with a lot of room to rise, and is
paying rich dividends. I added to the position we had in NATIONSBANK and WEST
ONE BANCORP; and began new positions in PNC (Pittsburgh) and FLEET FINANCIAL. I
also invested in the brokerage house SALOMON.
With its new management, Salomon is recovering from its ugly 1991 treasury
bidding scandal. PNC, yielding 5.6%, and Fleet Financial, yielding 5.2%, are
also recovering from the solvable problems that temporarily lowered their share
prices. I bought close to their lows, and I believe that no matter which way
interest rates go, financial stocks are a good place to be.
I expanded our food and tobacco holdings, primarily with PHILIP MORRIS.
Yielding 5.4%, this company brings growth potential as well as current income to
the portfolio.
I think technology will continue to grow faster than the overall economy.
Here I went with known performers: blue chip AT&T and MOTOROLA, the major
equipment supplier in the wireless communications war. On the long distance
front, AT&T will benefit from an expected reduction in its largest cost, the
money it pays local phone companies to access the local networks. Additionally,
AT&T is now the second largest credit card company.
In addition to excellent yields, the local telephone companies we hold
(CENTURY TELEPHONE, GTE and U S WEST) have excellent geographical
diversification. Their franchises are largely in rural markets which we expect
will face less competition than urban areas.
Given my view that the economy will grow, albeit slowly, I added some
cyclicals (companies that rise or fall with the economy). I bought forest
products producers WILLAMETTE and WEYERHAEUSER and I also added to our TEXACO
position. Oil normally rises with the economy; meanwhile the company was
yielding over 5%.
[PHOTO]
RICH MEAGLEY
Still, I am not overly optimistic about the near-term prospects of the stock
market. The nearly 10% that the broad market gained during the first quarter
could be it for the whole year. Given that, I'm looking for stocks with yields
that I can take advantage of. With rich yields, many of our holdings could do
well with just a one or two percent share price gain.
The purchase and sale decisions I make for our portfolio are not based on a
market outlook, but on qualities we see in individual companies. Rest assured, I
will continue working to uphold the FundGs outstanding record, by buying and
holding the best companies at the best prices.
/s/ Rich Meagley
Rich Meagley, Equity Fund Manager
Rich Meagley joined SAFECO in 1983. After advancing from analyst to Northwest
Fund Manager, he left the company. He re-joined in January 1995 as Equity Fund
Manager. He holds an M.B.A. from the University of Washington, and is a
Chartered Financial Analyst and an avid golfer.
- 9 -
<PAGE> 12
HIGHLIGHTS
SAFECO EQUITY FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
TOP TEN HOLDINGS PERCENT OF NET ASSETS
=====================================================
<S> <C>
Philip Morris Cos., Inc. 3.4%
(Food, Beverage & Tobacco Company)
GTE Corp. 3.3%
(Telephone Company)
Knight-Ridder, Inc. 3.2%
(Newspaper Publisher)
U S WEST, Inc. 3.1%
(Telephone Company)
Texaco, Inc. 3.0%
(Oil Company)
Hartford Steam Boiler Inspection &
Insurance Co. 2.8%
(Insurance & Engineering Company)
PNC Bank Corp. 2.6%
(Bank)
Motorola, Inc. 2.5%
(Communications Equipment Manufacturing)
Salomon, Inc. 2.5%
(Brokerage)
Crompton & Knowles Corp. 2.4%
(Textile Dye Manufacturer)
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE PURCHASES (SEPT. TO MARCH) COST
=====================================================
<S> <C>
Philip Morris Cos., Inc. $17,193,314
Salomon, Inc. 15,434,640
Motorola, Inc. 14,599,260
PNC Bank Corp. 14,253,445
Seagram Co., Ltd. 12,058,057
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SALES (SEPT. TO MARCH) PROCEEDS
=====================================================
<S> <C>
Callaway Golf Co. $11,646,143
*Allergan, Inc. 8,945,708
*Anthem Electronics, Inc. 7,756,200
*Schlumberger Ltd. 7,608,218
*Dresser Industries 5,958,003
- - -----------------------------------------------------
</TABLE>
* Security sold, no longer in Portfolio
<TABLE>
<CAPTION>
TOP FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
=====================================================
<S> <C>
*MegaTest Corp. 65.8%
(Semi-Conductor Capital Equipment)
*Emulex Corp. 41.9%
(Networking Interface Products)
Mentor Graphics Corp. 38.9%
(Electronic Design Software)
Hewlett-Packard 37.8%
(Computer Hardware)
Neostar 27.4%
(Specialty Software Retailer)
- - -----------------------------------------------------
</TABLE>
*Security sold, no longer in portfolio.
<TABLE>
<CAPTION>
BOTTOM FIVE PERFORMERS
(SEPT. TO MARCH) PERCENT RETURN
=====================================================
<S> <C>
*Grupo Televisa S.A. -52.0%
(Media)
*Telefonos De Mexico, S.A. (ADR) -44.2%
(Mexico's Telephone Company)
*Cementos Mexicanos, S.A. -39.2%
(Cement)
*Transportacion Maritima (ADS) -26.5%
(Shipping)
Applied Magnetics Corp. -25.8%
(Magnetic Recording Heads for Computers)
- - -----------------------------------------------------
</TABLE>
*Security sold, no longer in Portfolio
- 10 -
<PAGE> 13
PORTFOLIO OF INVESTMENTS
SAFECO EQUITY FUND
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
====================================================================
<S> <C>
COMMON STOCKS - 92.9%
AEROSPACE - 0.7%
69,500 Boeing Co. $ 3,744
BANKING & FINANCE - 9.8%
200,000 -Fleet Financial Group, Inc . 6,475
132,700 -J.P. Morgan & Co., Inc. 8,095
254,000 NationsBank Corp. 12,890
575,000 -PNC Bank Corp. 14,016
235,000 West One Bancorp 6,404
200,000 Wilmington Trust Co. 4,850
CHEMICALS - 3.5%
770,000 Crompton & Knowles Corp. 12,897
580,000 Ethyl Corp. 5,945
COMPUTER HARDWARE - 1.8%
405,000 *Applied Magnetics Corp. 1,063
180,000 *Evans & Sutherland Computer Corp. 2,700
49,000 -Hewlett-Packard Co. 5,898
COMPUTER SOFTWARE - 5.9%
701,000 *Information Resources, Inc. 8,587
380,200 MacNeal-Schwendler Corp. 4,610
651,000 *Mentor Graphics Corp. 10,172
117,000 *Microsoft Corp. 8,322
COSMETICS - 1.7%
433,500 Maybelline, Inc. 9,103
DRUGS & HOSPITAL SUPPLIES - 5.6%
170,000 *Genzyme Corp. 6,587
383,000 Glaxo Holdings plc (ADR) 8,761
63,000 Schering-Plough Corp. 4,686
129,500 Warner-Lambert Co. 10,133
ELECTRICAL EQUIPMENT & ELECTRONICS - 4.3%
143,925 *-Arrow Electronics, Inc. 6,063
250,000 -Motorola, Inc. 13,656
88,600 Watkins-Johnson Co. 3,389
FINANCIAL SERVICES - 3.1%
152,200 -SEI Corp. 2,892
400,000 -Salomon, Inc. 13,550
FOOD & TOBACCO - 8.8%
311,900 American Brands, Inc. 12,242
179,500 Dole Food Co., Inc. 5,206
280,000 -Philip Morris Cos., Inc. 18,270
518,700 Smart & Final, Inc. 8,040
294,250 Tasty Baking Co. 3,788
HEALTH CARE - 0.4%
185,000 Carter-Wallace, Inc. 2,197
HOUSEHOLD PRODUCTS - 3.9%
226,398 Block Drug Co., Inc. 7,924
195,200 Church & Dwight Co., Inc. 3,562
300,000 -Paragon Trade Brands, Inc. 4,275
140,500 -WD-40 Co. 5,550
INSURANCE - 5.5%
58,000 American International Group, Inc. 6,047
396,000 Equitable Cos., Inc. 8,712
345,400 Hartford Steam Boiler Inspection
& Insurance Co. 14,852
LEISURE TIME - 1.5%
576,400 Callaway Golf Co. 8,070
MACHINERY - 1.3%
407,000 -Giddings & Lewis, Inc. 6,919
PAPER & FOREST PRODUCTS - 4.2%
300,000 -Pope & Talbot, Inc. 4,800
172,000 -Weyerhaeuser Co. 6,687
200,000 -Willamette Industries, Inc. 10,900
PETROLEUM & PETROLEUM SERVICES - 3.0%
244,000 Texaco, Inc. 16,226
- - ----------------------------------------------------------------
</TABLE>
* Non-income producing security.
+ Affiliated issuer as defined by the Investment Company Act of 1940 (the
Fund owns 5% or more of the outstanding voting shares of the company).
- - - New to Portfolio since last Report.
See Notes to Financial Statements
- 11 -
<PAGE> 14
PORTFOLIO OF INVESTMENTS
SAFECO EQUITY FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
=================================================================
<S> <C>
POLLUTION CONTROL - 1.3%
382,500 Landauer, Inc. $ 6,981
PUBLISHING - 3.5%
117,900 *DIMAC Corp. 1,680
299,700 Knight-Ridder, Inc. 16,933
REAL ESTATE INVESTMENT TRUSTS - 8.3%
194,800 CBL & Associates Properties, Inc. 3,896
200,600 Carr Realty Corp. 3,485
334,000 Crown American Realty Corp. 4,342
239,000 Evans Withycombe Residential, Inc. 4,780
205,800 Glimcher Realty Trust 4,116
215,500 -Horizon Outlet Centers Co. 4,795
257,000 -Irvine Apartment Communities, Inc. 4,016
218,700 +Malan Realty Investors, Inc. 3,034
296,200 Mark Centers Trust Co. 3,777
290,000 McArthur/Glen Realty Corp. 4,060
377,000 South West Property Trust 4,524
RETAIL - 1.0%
427,700 *-NeoStar Retail Group, Inc. 5,239
TELECOMMUNICATIONS - 2.2%
225,000 -AT&T Corp. 11,644
TRANSPORTATION - 1.2%
300,000 -Airborne Freight Corp. 6,263
UTILITIES-TELEPHONE - 8.0%
296,200 Century Telephone Enterprise Co. 8,997
528,400 GTE Corp. 17,569
411,000 U S WEST, Inc. 16,440
WINE & SPIRITS - 2.4%
400,000 -Seagram Co., Ltd. 12,700
--------
TOTAL COMMON STOCKS 499,026
--------
PREFERRED STOCKS - 0.8%
FOOD & TOBACCO - 0.8%
122,000 ConAgra, Inc. $1.6875 Convertible 4,117
--------
TOTAL PREFERRED STOCKS 4,117
--------
SHORT-TERM INVESTMENTS - 7.3%
U.S. AGENCY NOTES:
$39,361,656 Federal Home Loan Mortgage Corp.
6.10%, due 4/03/95 39,362
--------
TOTAL SHORT-TERM INVESTMENTS 39,362
--------
TOTAL INVESTMENTS - 101.0% 542,505
Liabilities, less Other Assets (5,575)
--------
NET ASSETS $536,930
========
- - -----------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- 12 -
<PAGE> 15
REPORT FROM THE FUND MANAGER
SAFECO INCOME FUND
May 1, 1995
For the 12 months ending March 31, 1995, the SAFECO Income Fund returned
10.39%. During the same period, equity-income funds on average returned 8.76%
and the S&P 500 Index gained 15.54%.
Our concentration in interest-rate sensitive securities and cyclical
industries helped the Fund outperform its peer group.
A decline in the final quarter of 1994 and a rally in the first quarter of
1995 netted a total return of 5.50% for the six months just ended. In the fourth
quarter, the SAFECO Income Fund was down 2.99%, as our interest-rate sensitive
stocks (banking, finance, real estate investment trusts, and telephone
utilities) were hit hard by the Federal Reserve Board's increases in interest
rates. In the first quarter of 1995, the SAFECO Income Fund gained 8.74%, as
those stocks recovered with the stabilization of interest rates and cyclicals
(stocks that rise and fall with the economy) out-performed the general market.
CYCLICALS CYCLE HIGH
The Income Fund's cyclical strength over the last six months included SEARS
ROEBUCK and DEERE, both up 18%. GENERAL ELECTRIC, which we added in December,
climbed 17% by the end of March.
The oil group, which tends to do well late in an economic recovery,
contributed greatly over the last six months. The oils, which also have
attractive yields, grew to be our largest sector at 12.2% of net assets. Over
the last six months, ATLANTIC RICHFIELD was up 14%, EXXON was up 16%, and ROYAL
DUTCH PETROLEUM was up 10%. TEXACO and the PENNZOIL 6 1/2% convertible
debentures were up 11% and 9%, respectively.
BELL SOUTH led the telephone industry's fine showing, with a 13.3% gain. GTE,
our largest holding at 4.2% of net assets, was up 9.5%. The phone companies'
gains were due in part to settling interest rates.
[PHOTO]
ARLEY HUDSON
Government pressure came off the drug sector and it buoyed. MERCK & CO. was
up 21% and AMERICAN HOME PRODUCTS up 19% over the last six months.
W.R. GRACE, a specialty chemical and dialysis company with somewhat cyclical
behavior, was the best performer in the portfolio. Its gain of 24% was due
mostly to management changes, earnings improvements and the possibility that the
company may be split up or sold. I took profits, selling about half of our
position.
HAVING A HARD TIME
RJR HOLDINGS was down 7% from our purchase as the threat of continuing legal
action hangs over the tobacco industry. CANADIAN PACIFIC slid 12% in the six
months on concerns over Canada's economic recovery. WASHINGTON ENERGY was down
10% due to unfavorable rate decisions.
(Continued on next page.)
- 13 -
<PAGE> 16
REPORT FROM THE
INCOME FUND MANAGER (CONTINUED)
The entire Real Estate Investment Trust group suffered due to higher interest
rates and a slowdown in real estate activity.
The retail sector continued to languish. The EAGLE HARDWARE 6 1/4%
convertible debentures were down 14% due to no earnings growth and increased
competition. I sold the K-MART holding, as that situation appeared to be
deteriorating.
I replaced MERCANTILE BANCORP, a longtime position, with WEST ONE BANCORP, a
bank in Idaho, Utah, Washington and Oregon, where we feel there is greater
appreciation potential.
The final name eliminated from the portfolio was the SALOMON MICROSOFT ELK
(equity-linked securities) which reached our objective and was sold.
NEW TO THE PORTFOLIO
We added CAPSTONE CAPITAL TRUST 10 1/2% convertible debentures. Capstone is a
health-care REIT that provides outpatient care facilities. We bought the RJR
HOLDINGS SERIES C preference equity redemption cumulative stock (PERC), which
has a 9.5% current yield and participates in any appreciation of the common
stock over the next two years of up to 50%. And the NATIONAL SEMICONDUCTOR 3.25%
convertible preferred was added to the portfolio. National Semiconductor designs
and manufactures a variety of semiconductor products for fax machines, computers
and computer networks and communications equipment.
The common stock of POLARIS INDUSTRIES was also added to the portfolio.
Polaris designs, manufactures and markets snowmobiles, all-terrain vehicles and
jet skis. The company is growing rapidly and, over the next three to five years,
earnings per share are expected to grow 18-20% annually.
We bought J. C. PENNEY stock. Penney now is the fourth largest retailer in
the USA, with stores in all 50 states.
STOCK PICKER'S MARKET, WITH
INCOME PROTECTION
The S&P 500 Index is currently priced at 16 times our 1995 earnings estimate.
With prices this high, I believe that further advancement of the market will be
tied to earnings improvements generated by the economic recovery. It's unlikely
the market will advance as a whole, but we will see individual issues rise, or
fall, on their own stories.
If the market weakens, I would expect the SAFECO Income Fund to outperform
the S&P 500 Index. The higher yields in this portfolio reduce its downside risk
in weak markets.
/s/ ARLEY HUDSON
Arley Hudson, Income Fund Manager
- - -------------------------------------
Vice President Arley Hudson joined SAFECO in 1973. He has managed SAFECO
Income Fund since 1978, and is a Chartered Financial Analyst and graduate of
the University of Washington School of Banking and Finance.
- 14 -
<PAGE> 17
HIGHLIGHTS
SAFECO INCOME FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
- - ------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOP TEN HOLDINGS PERCENT OF NET ASSETS
- - ------------------------------------------------------------------------
<S> <C>
GTE Corp. 4.2%
(Telephone Company)
Texaco, Inc. 2.7%
(Oil Company)
GATX Corp. $3.875 Cumulative Convertible 2.5%
(Railway & Terminal Operator)
Amoco Canada Petroleum Co., Ltd. 2.5%
7.375%, due 9/01/13
(Oil Company)
Royal Dutch Petroleum Co. 2.4%
(Oil Company)
Ford Motor Co. 8.40% Cumulative Convertible 2.3%
(Auto Manufacturer)
American Home Products Corp. 2.2%
(Pharmaceuticals)
Minnesota Mining & Manufacturing 2.1%
(Conglomerate)
ConAgra, Inc. $1.6875 Convertible 2.1%
(Foods)
Weyerhaeuser Co. 2.0%
(Forest Products)
TOP FIVE PURCHASES (SEPT. TO MARCH) COST
- - -----------------------------------------------------------------------
Polaris Industries, Inc. $3,071,883
JC Penney Co., Inc. 2,578,600
Union Pacific Corp. 2,543,738
Kimberly-Clark Corp. 2,533,000
West One Bancorp 2,201,874
TOP FIVE SALES (SEPT. TO MARCH) PROCEEDS
- - -----------------------------------------------------------------------
*Salomon, Inc. $4,639,482
*Thomas & Betts Corp. 3,385,317
*McKesson Corp. 3,191,843
*Air Touch Communications 2,335,122
*Mercantile Bancorp 2,216,326
*Security sold, no longer in portfolio.
TOP FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
- - -----------------------------------------------------------------------
Grace (WR) & Co. 24.4%
(Specialty Chemical and Dialysis)
Merck and Co., Inc. 21.4%
(Pharmaceuticals)
American Home Products Corp. 18.8%
(Pharmaceuticals)
Deere & Co. 18.4%
(Farm & Construction Equipment)
Sears Roebuck & Co. 18.3%
(Retail Chain)
BOTTOM FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
- - -----------------------------------------------------------------------
Consolidated Freightways -26.1%
(Freight)
McArthur/Glen Realty Corp. -22.8%
(Real Estate)
*K-Mart Corp. $3.41 Convertible -21.9%
(Retail Chain)
Blair Corp. -17.6%
(Mail-Order Retailer)
Eagle Hardware & Garden, Inc. 6.25%, due 3/15/01 -14.1%
(Home Improvement Centers)
- - -----------------------------------------------------------------------
*Security sold, no longer in portfolio.
</TABLE>
- 15 -
<PAGE> 18
HIGHLIGHTS
SAFECO INCOME FUND
As of March 31, 1995 (Unaudited)
- - -------------------------------------------------------------
SAFECO INCOME FUND
NET ASSET CAPITALIZATION WEIGHTINGS
AS A PERCENT OF NET ASSETS AS OF MARCH 31, 1995
[PIE CHART]
1. Large: 49.6%
($1 Bil. and above)
2. Medium: 3.2%
($500 Mil. -- $1 Bil.)
3. Small: 26.6%
(Less than $500 Mil.)
4. Cash & Other Assets
Less Liabilities: 2.1%
5. Bonds: 18.5%
- - -------------------------------------------------------------
SAFECO INCOME FUND
TOP FIVE INDUSTRIES AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1995
[GRAPH]
Graph showing the following:
Petrolelum & Petroleum Services: 12.3%
Transportation: 10.4%
Banking/Finance: 10.0%
Utilities -- Telephone: 8.9%
Paper & Forest Products: 5.7%
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
- - -------------------------------------------------------------
<S> <C>
COMMON STOCKS - 61.3%
BANKING & FINANCE - 5.7%
70,000 Boatmen's Bancshares, Inc. $2,118
60,250 Keycorp 1,702
100,000 Norwest Corp. 2,538
105,000 US Bancorp 2,730
80,000 -West One Bancorp 2,180
CHEMICALS - 1.9%
35,000 Grace (WR) and Co. 1,864
50,000 WD-40 Co. 1,975
CONGLOMERATES - 2.1%
70,000 Minnesota Mining & Manufacturing Co. 4,069
DRUGS & HOSPITAL SUPPLIES - 3.5%
60,000 American Home Products Corp. 4,275
60,000 Merck and Co., Inc. 2,557
ELECTRICAL EQUIPMENT & ELECTRONICS - 1.1%
40,000 -General Electric Co. 2,165
FOOD & TOBACCO - 2.4%
80,000 American Brands, Inc. 3,140
260,000 -RJR Nabisco Holdings 1,528
INDUSTRIAL MACHINERY & EQUIPMENT - 1.0%
25,000 Deere & Co. 2,031
INSURANCE - 1.5%
70,000 Hartford Steam Boiler Inspection
& Insurance Co. 3,010
LEISURE TIME - 3.3%
67,400 -Polaris Industries, Inc. 3,252
100,000 Sturm Ruger & Co., Inc. 3,188
MANUFACTURING - 0.7%
69,589 -Mark IV Industries, Inc. 1,427
</TABLE>
See Notes to Financial Statements
- 16 -
<PAGE> 19
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
- - -----------------------------------------------------------------
<S> <C>
PAPER & FOREST PRODUCTS - 3.3%
50,000 -Kimberly-Clark Corp. $2,600
100,000 Weyerhaeuser Co. 3,888
PETROLEUM & PETROLEUM SERVICES - 8.3%
24,000 Atlantic Richfield Co. 2,760
50,000 Exxon Corp. 3,338
40,000 Royal Dutch Petroleum Co. 4,800
80,000 Texaco, Inc. 5,320
POLLUTION CONTROL - 1.2%
125,000 Landauer, Inc. 2,281
PUBLISHING - 0.9%
60,000 Deluxe Corp. 1,710
REAL ESTATE INVESTMENT TRUSTS - 5.2%
80,000 Horizon Outlet Centers Co. 1,780
80,000 Kranzco Realty Trust 1,420
150,000 Mark Centers Trust Co. 1,912
110,000 McArthur/Glen Realty Corp. 1,540
148,600 Omega Health Care Investors 3,529
RETAIL - 3.6%
30,000 Blair Corp. 1,039
60,000 -J.C. Penney Co. Inc. 2,692
62,039 -Sears Roebuck & Co. 3,311
TRANSPORTATION - 4.5%
130,000 Canadian Pacific, Ltd. 1,950
80,000 -Consolidated Freightways 2,130
30,000 Norfolk & Southern Corp. 2,006
50,000 -Union Pacific Corp. 2,750
UTILITIES-ELECTRIC DISTRIBUTION - 0.7%
56,159 Eastern Utilities Associates 1,341
UTILITIES-GAS DISTRIBUTION - 1.5%
64,200 Northwest Natural Gas Co. 2,006
64,700 Washington Energy Corp. 865
UTILITIES-TELEPHONE - 8.9%
35,000 Bell Atlantic Corp. 1,846
30,000 -BellSouth Corp. 1,785
250,000 GTE Corp. 8,312
65,000 Nynex Corp. 2,576
75,000 U S WEST, Inc. 3,000
-------
TOTAL COMMON STOCKS 120,236
-------
PREFERRED STOCKS - 18.1%
AUTOS & AUTO PARTS - 2.2%
50,000 Ford Motor Co.
8.40% Cumulative Convertible 4,413
BANKING & FINANCE - 3.6%
65,000 BankAmerica Corp. Series G
6.50% Convertible 3,502
40,000 Washington Mutual Savings Bank Series C
6.00% Convertible 3,560
ELECTRONICS - 1.0%
30,000 -National Semiconductor
3.25% Convertible 1,972
FOOD & TOBACCO - 2.9%
120,000 ConAgra, Inc. $1.6875 Convertible 4,050
260,000 RJR Nabisco Holdings $0.835 Convertible 1,657
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
50,000 AGCO Corp. $25 Depository
Convertible Exchangeable 3,244
</TABLE>
- - -----------------------------------------------------------------
- - -New to Portfolio since last Report.
See Notes to Financial Statements
- 17 -
<PAGE> 20
PORTFOLIO OF INVESTMENTS
SAFECO INCOME FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
- - ---------------------------------------------------------------------------------
<S> <C>
INSURANCE - 1.2%
40,000 Travelers, Inc. Series B 5.50% Convertible $ 2,290
PAPER & FOREST PRODUCTS - 1.5%
70,400 James River Corp. of Virginia
$3.375 Cumulative Convertible
Exchangeable 2,992
TRANSPORTATION - 4.0%
44,400 Burlington Northern, Inc. Series A
6.25% Cumulative Convertible 2,858
90,000 GATX Corp.
$3.875 Cumulative Convertible 4,905
--------
TOTAL PREFERRED STOCKS 35,443
--------
CORPORATE BONDS - 18.5%
Convertible Subordinated Debentures:
BANKING & FINANCE - 0.7%
$1,500,000 Landmark Bancshares Corp.
8.75%, due 11/01/98 1,451
CONGLOMERATES - 1.9%
3,632,000 -Cooper Industries, Inc. 6.50%, due 10/01/02 3,700
CONSUMER PRODUCTS - 0.8%
1,515,000 Interface, Inc. 8.00%, due 9/15/13 1,500
DRUGS - 1.2%
2,400,000 Bindley Western Industries, Inc.
6.50%, due 10/01/02 2,361
ELECTRICAL EQUIPMENT & ELECTRONICS - 1.8%
627,000 LTX Corp. 13.50%, due 4/15/11 638
1,300,000 MagneTek, Inc. 8.00%, due 9/15/01 1,337
2,600,000 Micropolis Corp. 6.00%, due 3/15/12 1,482
ENTERTAINMENT - 1.8%
3,482,000 Time Warner, Inc. 8.75%, due 1/10/15 3,500
HEALTH CARE SERVICES - 0.8%
1,000,000 Summit Health, Ltd. 7.50%, due 4/01/03 1,593
PAPER & FOREST PRODUCTS - 0.9%
1,600,000 International Paper Corp.
5.75%, due 9/23/02 1,747
PETROLEUM & PETROLEUM SERVICES - 4.0%
4,000,000 Amoco Canada Petroleum Co., Ltd.
7.375%, due 9/01/13 4,850
2,500,000 Pennzoil Co. 6.50%, due 1/15/03 2,931
REAL ESTATE - 1.0%
2,000,000 -Capstone Capital Trust, Inc.
10.50%, due 4/01/02 2,005
RETAIL - 1.7%
1,500,000 Eagle Hardware & Garden, Inc.
6.25%, due 3/15/01 1,009
2,500,000 Price/Costco, Inc. 6.75%, due 3/01/01 2,403
TRANSPORTATION - 1.9%
2,000,000 Alaska Air Group, Inc.
6.875%, due 6/15/14 1,560
2,900,000 Interpool, Inc. 5.25%, due 12/15/18 2,222
--------
TOTAL CORPORATE BONDS 36,289
--------
SHORT-TERM INVESTMENTS - 1.2%
Investment Companies:
2,344,142 Short-Term Investments Co.
(Prime Portfolio) 2,344
--------
TOTAL SHORT-TERM INVESTMENTS 2,344
--------
TOTAL INVESTMENTS - 99.1% 194,312
Other Assets, less Liabilities 1,751
--------
NET ASSETS $196,063
========
- - --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- 18 -
<PAGE> 21
REPORT FROM THE FUND MANAGER
SAFECO NORTHWEST FUND
May 1, 1995
For the 12 months ended March 31, 1995, the SAFECO Northwest Fund
outperformed the Northwest 50(TM) Index, but lagged behind the average growth
fund. The Fund returned 5.68% for the 12 months and 3.34% for the six months
just ended. The Lipper average return for growth funds for the 12 months just
ended was 8.81%. The Northwest 50(TM) Index was up 5.45% for the 12 months just
ended.
Buying initial public offerings helped us out-perform our Northwest peers and
index. Our overweighting in Northwest financial stocks held us under the average
growth fund, which selects issues from the entire domestic stock market.
BANKS SLIP, OTHERS PROSPER
Our largest industry sectors, banks and savings & loans, suffered over the
last six months and contracted as a percent of net assets. Our largest bank
holding, US BANCORP (5.4% of net assets), was the only member of the two groups
to post a positive return, 2.0% for the six months. WASHINGTON MUTUAL SAVINGS
and WEST ONE slipped -1.5% and -2.7%, respectively. The other banks and
savings & loans posted similar performances.
The good news is that our other large holdings did well. HILLHAVEN, 6.8% of
net assets, was up 17.1% with a takeover offer. BOEING, our second largest
holding, was up 24.9% over the last six months. The giant's simply coming back
- - -- getting over the loss of its military business, getting orders, becoming
cost-efficient and cutting line and staff.
During the six-month period, MICROSOFT, 6.0% of net assets, gained 26.7% in
value. Our other technology holdings were outstanding performers as well. MENTOR
GRAPHICS, semiconductor manufacturer, and MERIX, a new company for us that hooks
computer components to backboards, were up 38.9% and 21.0%, respectively.
[PHOTO]
CHARLES R. DRIGGS
Video renter HOLLYWOOD ENTERTAINMENT continued to add more stores, increase
margins in its existing stores and to be a top performer for us. It was up 25%.
Night goggle manufacturer FLIR (4% of net assets) was up 25.4% over the last
six months. Its orders have stepped up with increased surveillance, border
patrols and drug interdiction.
NIKE, 4.4% of net assets, was up 26.8%, with a strong rebound in its core
product, men's basketball shoes. ALBERTSON'S, 5.4% of net assets, increased
10.7% during the six-month period. The company's reputation for being well-run,
its expansion and its earnings growth have enhanced its value.
BUYING NEW NAMES AND SOME OLD
A flurry of initial public offerings over the last few years has expanded the
universe of Northwest stocks. This last quarter, we added three exciting new
stocks to the portfolio: SMC, THRUSTMASTER and SEMITOOL.
SMC designs, manufactures and markets Safari,
(Continued on next page.)
- 19 -
<PAGE> 22
REPORT FROM THE
NORTHWEST FUND MANAGER (CONTINUED)
Marquis and Beaver motor coaches. SMC management got its start at MONACO COACH,
another motor-coach manufacturer we hold in the portfolio. For the six months,
Monaco and SMC are up 6.7% and 32.3%, respectively.
Thrustmaster has translated its military simulation expertise into computer
games. Flight simulators, rudder and throttle control systems, as well as the
Phantom F-4 joystick, make up its product line. Under development are golf and
Formula One (racing) systems. Headquartered in Portland, Thrustmaster has a
limited, but strong, record of sales and earnings growth.
Semitool, headquartered in Kalispell, Montana, supercleans the silicon wafers
used to manufacture computer chips. This stock is riding the wafer/chip shortage
wave. So far the stock has climbed 31.3%.
I also added MACHEEZMO MOUSE, a chain of healthy-fare Mexican food
restaurants, to the portfolio and, as mentioned earlier, Merix.
When their share prices weakened, I filled out our positions in the meatless
hot dog and burger purveyor, WHOLESOME & HEARTY FOODS as well as ARROW
TRANSPORTATION.
We had three sales in six months. We took profits on freight forwarder,
Expeditors International, when it reached our target price. I sold Fred Meyer,
whose prospects I perceive as dull, and added to our NORDSTROM position when it
came into my price range. And, I tendered part of our QUALITY FOOD CENTER
position when an infusion of private money brought unknowns into the company --
it appears QFC will leave its Puget Sound niche to compete with the mega grocery
chains. We'll see what happens with a smaller position.
MORE ON BOEING AND THE REGIONAL OUTLOOK
Boeing's employment cuts have had the same slowing effect on the Puget Sound
economy that the Fed's short-term interest rate hikes have had on the national
economy: Boeing's lay-off of 4,590 of its 83,268 aerospace workers in Washington
State April 20, 1993 to April 21, 1994 has slowed personal income growth --
which has slowed spending, which has slowed the region's economic growth.
However, Boeing recently mitigated the damage its future lay-offs could level
on the economy with a surprise early-retirement offering. While not a complete
cure for the flat Puget Sound economy, thousands of pension payouts would keep
cash flowing. It's as though Boeing engineered the region's own "soft-landing."
Happily, the broader Northwest economy continues to diversify, especially in
service and technology. Our outlook calls for employment gains and personal
income recoveries that outpace the national average. By 1997, the Northwest
economy could really be flying if Boeing and these other sectors continue to
prosper.
/s/ CHARLES R. DRIGGS
Charles R. Driggs, Northwest Fund Manager
- - -----------------------------------------
Charles Driggs has 27 years in securities analysis in the Northwest. Now a
Vice President, he joined SAFECO in 1984 as a utility and financial services
expert and took the helm of SAFECO Northwest Fund in November, 1992. Driggs
holds a degree in investments from Portland State University in Oregon.
- 20 -
<PAGE> 23
HIGHLIGHTS
SAFECO NORTHWEST FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
TOP TEN HOLDINGS PERCENT OF NET ASSETS
- - ----------------------------------------------------------------------
<S> <C>
Hillhaven Corp. 6.8%
(Health Care Provider)
Boeing Co. 6.0%
(Aerospace)
Microsoft Corp. 6.0%
(Personal Computer Software)
US Bancorp 5.4%
(Bank)
Albertson's, Inc. 5.4%
(Grocery Chain)
Longview Fibre Co. 4.8%
(Forestry)
NIKE, Inc. 4.4%
(Athletic & Leisure Footware & Apparel)
Washington Mutual Savings Bank 4.2%
(Savings & Loan)
West One Bancorp 4.1%
(Bank)
Flir Systems, Inc. 4.0%
(Night Vision Detection Equipment)
TOP FIVE PURCHASES (MARCH TO SEPT.) COST
- - ----------------------------------------------------------------------
Paragon Trade Brands, Inc. $427,124
BMC West Corp. 323,332
Nordstrom, Inc. 311,640
Flir Systems, Inc. 255,000
Macheezmo Mouse Restaurants 247,500
TOP THREE SALES (SEPT. TO MARCH) PROCEEDS
- - ----------------------------------------------------------------------
Expeditors International of Washington, Inc. $2,065,188
*Fred Meyer, Inc. 1,227,559
Quality Food Centers, Inc. 907,900
- - ----------------------------------------------------------------------
*Security sold, no longer in portfolio.
TOP FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
- - ----------------------------------------------------------------------
Mentor Graphics Corp. 38.9%
(Electronic Design Software)
SMC Corp. 32.3%
(Motor Coach Manufacturer)
Semitool, Inc. 31.3%
(Silicon Chip Manufacturer)
NIKE, Inc. 26.8%
(Athletic & Leisure Footware & Apparel)
Microsoft Corp. 26.7%
(Personal Computer Software)
BOTTOM FIVE PERFORMERS (SEPT. TO MARCH) PERCENT RETURN
- - ----------------------------------------------------------------------
Procyte Corp. -73.6%
(Pharmaceuticals)
Eagle Hardware & Garden, Inc. -32.2%
(Hardware Warehouse Store)
Arrow Transportation Co. -31.5%
(Liquid Chemical Transporter)
Carr-Gottstein Foods Co. -21.3%
(Grocery Chain)
Wholesome & Hearty Foods, Inc. -17.5%
(Veggie Burgers)
</TABLE>
- 21 -
<PAGE> 24
HIGHLIGHTS
SAFECO NORTHWEST FUND
As of March 31, 1995 (Unaudited)
- - --------------------------------------------------------
SAFECO NORTHWEST FUND
NET ASSET CAPITALIZATION WEIGHTINGS
AS A PERCENT OF NET ASSETS AS OF MARCH 31, 1995
[PIE CHART]
1. Large: 44.5%
($1 Bil. and above)
2. Medium: 15.8%
($500 Mil. - $1 Bil.)
3. Small: 36.1%
(Less than $500 Mil.)
4. Cash & Other Assets
Less Liabilities: 3.6%
SAFECO NORTHWEST FUND
TOP FIVE INDUSTRIES AS A PERCENT OF NET ASSETS
AS OF MARCH 31, 1995
[GRAPH]
Graph showing the follwing:
Banks: 15.8%
Savings & Loans/Savings Banks: 10.1%
Health Care: 9.9%
Retail: 9.9%
Computer Software: 8.4%
PORTFOLIO OF INVESTMENTS
SAFECO NORTHWEST FUND
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
- - --------------------------------------------------------
<S> <C>
COMMON STOCKS - 96.4%
AEROSPACE - 6.0%
40,000 Boeing Co. $2,155
APPAREL MANUFACTURING - 4.4%
21,000 NIKE, Inc. 1,567
AUTOS - 1.3%
27,000 *Monaco Coach Corp. 432
5,000 *-SMC Corp. 51
BANKS - 15.8%
22,000 *Cascade Bancorp 264
36,450 Keycorp 1,030
60,000 *Northrim Bank 412
75,000 US Bancorp 1,950
37,800 West Coast Bancorp, Inc. 539
54,000 West One Bancorp 1,471
BUILDING MATERIALS - 2.8%
20,000 -BMC West Corp. 290
40,000 TJ International, Inc. 700
COMPUTER SOFTWARE - 8.4%
50,000 *Mentor Graphics Corp. 781
30,100 *Microsoft Corp. 2,141
10,000 *-ThrustMaster, Inc. 95
ELECTRICAL EQUIPMENT & ELECTRONICS - 4.9%
93,000 *Flir Systems, Inc. 1,441
5,000 *-Merix Corp. 126
10,000 -Semitool, Inc. 210
FOOD - 1.7%
54,000 *Wholesome and Hearty Foods, Inc. 628
</TABLE>
- 22 -
<PAGE> 25
PORTFOLIO OF INVESTMENTS
SAFECO NORTHWEST FUND (CONTINUED)
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT MARKET VALUE (000'S)
=================================================================================
<S> <C>
HEALTH CARE - 9.9%
27,000 *Advanced Technology Laboratories, Inc. $ 405
92,080 *Hillhaven Corp. 2,440
13,000 *Procyte Corp. 675
27,000 *Spacelabs Medical, Inc. 32
HOUSEHOLD PRODUCTS - 1.2%
30,000 -Paragon Trade Brands, Inc. 427
INDUSTRIAL PRODUCTS & SUPPLIERS - 2.5%
81,500 Univar Corp. 907
PAPER & FOREST PRODUCTS - 4.8%
101,300 Longview Fibre Co. 1,722
RESTAURANTS - 0.7%
35,000 -Macheezmo Mouse Restaurants, Inc. 254
RETAIL-GROCERS - 7.6%
60,000 Albertson's, Inc. 1,935
57,000 *Carr-Gottstein Foods Co. 342
21,684 Quality Food Centers, Inc. 453
RETAIL-OTHER - 9.9%
80,500 *Eagle Hardware & Garden, Inc. 594
21,000 *Hollywood Entertainment Corp. 735
20,000 Nordstrom, Inc. 815
95,000 *Price/Costco, Inc. 1,401
SAVINGS & LOANS / SAVINGS BANKS - 10.1%
51,175 Interwest Savings Bank $ 678
10,000 Security Bancorp 185
103,950 *Sterling Financial Corp. 1,247
75,000 Washington Mutual Savings Bank 1,505
TRANSPORTATION - 4.4%
20,000 Airborne Freight Corp. 418
95,000 *Arrow Transportation Co. 333
20,000 Expeditors International of Washington, Inc. 420
45,000 MK Rail Corp. 405
-------
TOTAL COMMON STOCKS 34,611
-------
SHORT-TERM INVESTMENTS - 4.1%
INVESTMENT COMPANIES:
$1,484,574 Short-Term Investments Co.
(Prime Portfolio) 1,485
-------
TOTAL SHORT-TERM INVESTMENTS 1,485
-------
TOTAL INVESTMENTS - 100.5% 36,096
Liabilities, less Other Assets (181)
-------
NET ASSETS $35,915
=======
=================================================================================
</TABLE>
*Non-income producing security.
- - -New to Portfolio since last Report.
See Notes to Financial Statements
- 23 -
<PAGE> 26
STATEMENTS OF ASSETS AND LIABILITIES
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME NORTHWEST
- - -- (In Thousands, Except Per-Share Amounts) -- FUND FUND FUND FUND
================================================================================================================
<S> <C> <C> <C> <C>
ASSETS
Investments, at Value
Common Stocks (Identified Cost $106,981,
$451,211, $98,644, and $28,322, respectively) $131,391 $495,992 $120,236 $34,611
Common Stocks of Affiliates
(Identified Cost $8,418 and $3,402,
respectively - Note 5) 6,765 3,034 -- --
-------- -------- -------- --------
Total Common Stocks 138,156 499,026 120,236 34,611
Preferred Stocks (Identified Cost $3,641,
and $35,439, respectively) -- 4,117 35,443 --
Corporate Bonds (Identified Cost $38,743) -- -- 36,289 --
Short-Term Investments 7,039 39,362 2,344 1,485
-------- -------- -------- --------
Total Investments 145,195 542,505 194,312 36,096
Receivables
Investment Securities Sold 10,742 4,547 1,163 --
Dividends and Interest 337 1,654 1,277 59
Capital Stock Sold -- 461 -- --
Deferred Organization Expense (Note 6) -- -- -- 3
-------- -------- -------- --------
Total Assets 156,274 549,167 196,752 36,158
-------- -------- -------- --------
LIABILITIES
Payables
Investment Securities Purchased 1,273 11,585 16 98
Capital Stock Redeemed 1,008 -- 146 99
Dividends -- 277 386 7
Investment Advisory Fees 91 276 113 22
Other 56 99 28 14
Organization Expense -- -- -- 3
-------- -------- -------- --------
Total Liabilities 2,428 12,237 689 243
-------- -------- -------- --------
NET ASSETS $153,846 $536,930 $196,063 $35,915
======== ======== ======== ========
SHARES OUTSTANDING (Note 2) 8,470 37,879 11,029 2,766
======== ======== ======== ========
NET ASSET VALUE PER SHARE
(Net Assets Divided by Shares Outstanding) $18.16 $14.17 $17.78 $12.99
======== ======== ======== ========
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- 24 -
<PAGE> 27
STATEMENTS OF OPERATIONS
As of March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME NORTHWEST
-- (In Thousands, Except Per-Share Amounts) -- FUND FUND FUND FUND
===========================================================================================================
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends from Unaffiliated Issuers $ 658 $ 6,785 $ 3,953 $ 239
Dividends from Affiliates (Note 5) 44 131 -- --
Interest 85 762 1,266 11
-------- -------- -------- ------
Total Investment Income 787 7,678 5,219 250
-------- -------- -------- ------
EXPENSES
Investment Advisory Fees (Note 6) 530 1,467 645 129
Shareholder Servicing Costs (Note 6) 174 476 157 47
Loan Interest 89 26 -- --
Reports to Shareholders 10 30 13 4
Custodian Fees 14 27 9 3
Legal and Auditing Fees 8 8 9 7
Trustees' Fees 2 2 2 2
Amortization of Organization Expenses -- -- -- 2
-------- -------- -------- ------
Total Expenses 827 2,036 835 194
-------- -------- -------- ------
NET INVESTMENT INCOME (LOSS) (40) 5,642 4,384 56
-------- -------- -------- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain on Investment Transactions
from Unaffiliated Issuers 19,845 17,107 6,454 604
Net Realized Loss on Investment Transactions
from Affiliates (Note 5) -- (301) -- --
-------- -------- -------- ------
Total Net Realized Gain 19,845 16,806 6,454 604
Net Change in Unrealized Appreciation (Note 4) (11,472) (3,263) (784) 456
-------- -------- -------- ------
NET GAIN ON INVESTMENTS 8,373 13,543 5,670 1,060
-------- -------- -------- ------
NET CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,333 $ 19,185 $ 10,054 $1,116
======== ======== ======== ======
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- 25 -
<PAGE> 28
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
SAFECO GROWTH FUND SAFECO EQUITY FUND
---------------------------- ----------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
------------ ------------ ------------ ------------
- - -- (In Thousands) -- 1995 1994 1995 1994
================================================================================================
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ (40) $ (200) $ 5,642 $ 4,322
Net Realized Gain on
Investments 19,845 20,876 16,806 13,155
Net Change in Unrealized
Appreciation (11,472) (12,312) (3,263) 18,088
--------- --------- --------- ---------
Net Change in Net Assets
Resulting from Operations 8,333 8,364 19,185 35,565
NET EQUALIZATION CREDITS (DEBITS) -- -- 103 616
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income -- -- (5,741) (4,933)
Net Realized Gain on
Investments (901) (20,672) (2,926) (13,160)
TRUST SHARE TRANSACTIONS (Note 2) (9,694) 9,693 113,504 245,823
--------- --------- --------- ---------
TOTAL CHANGE IN NET ASSETS (2,262) (2,615) 124,125 263,911
NET ASSETS AT BEGINNING OF PERIOD 156,108 158,723 412,805 148,894
--------- --------- --------- ---------
NET ASSETS AT END OF PERIOD $ 153,846 $ 156,108 $ 536,930 $ 412,805
========= ========= ========= =========
- - ------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- 26 -
<PAGE> 29
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
SAFECO INCOME FUND SAFECO NORTHWEST FUND
---------------------------- ---------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
------------ ------------ ------------ ------------
- - -- (In THousands) -- 1995 1994 1995 1994
==============================================================================================
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) $ 4,384 $ 9,034 $ 56 $ 129
Net Realized Gain on
Investments 6,454 2,934 604 1,055
Net Change in Unrealized
Appreciation (784) (6,382) 456 888
--------- --------- -------- --------
Net Change in Net Assets
Resulting from Operations 10,054 5,586 1,116 2,072
NET EQUALIZATION CREDITS (DEBITS) (25) (105) -- (3)
DIVIDENDS TO SHAREHOLDERS FROM
Net Investment Income (4,364) (8,932) (56) (128)
Net Realized Gain on
Investments -- (2,554) -- (1,037)
TRUST SHARE TRANSACTIONS (Note 2) (212) (6,404) (1,528) (4,152)
--------- --------- -------- --------
TOTAL CHANGE IN NET ASSETS 5,453 (12,409) (468) (3,248)
NET ASSETS AT BEGINNING OF PERIOD 190,610 203,019 36,383 39,631
--------- --------- -------- --------
NET ASSETS AT END OF PERIOD $ 196,063 $ 190,610 $ 35,915 $ 36,383
========= ========= ======== ========
- - ----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- 27 -
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The SAFECO Common Stock Trust ("Trust") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Trust consists of the SAFECO Growth Fund, SAFECO Equity
Fund, SAFECO Income Fund, and SAFECO Northwest Fund (together "the Funds"). The
following is a summary of significant accounting policies consistently followed
by the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
SECURITY VALUATION. Investments in securities are valued at the last reported
sales price, unless there are no transactions in which case they are valued at
the last reported bid price. Short-term investments purchased at par are valued
at cost. All other short-term investments are valued at amortized cost.
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
The cost of the portfolios is the same for financial statement and federal
income tax purposes. Realized gains and losses from security transactions are
determined using the identified cost basis.
INCOME RECOGNITION. Dividend income less foreign taxes withheld (if any) is
recorded on the ex-dividend date. Interest is accrued on short-term investments
and bonds daily.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment income is
declared as a dividend to shareholders as of the last business day (ex-dividend
date) of March, June, September and December. Net gains realized from security
transactions, if any, are normally distributed to shareholders at the end of
September and December.
EQUALIZATION. The Funds follow the accounting practice known as equalization
by which a portion of the proceeds from sales and cost of redemptions of capital
shares equivalent, on a per-share basis, to the amount of distributable net
investment income on the date of the transaction is credited or charged to
undistributed income. As a result, undistributed net investment income per share
is unaffected by sales or redemptions of a Fund's shares.
FEDERAL INCOME AND EXCISE TAXES. The Funds intend to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated investment
companies by distributing substantially all taxable income to their shareholders
in a manner which results in no tax to the Funds. Therefore, no federal income
or excise tax provision is required.
- 28 -
<PAGE> 31
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
2. TRUST SHARES
<TABLE>
<CAPTION>
SAFECO GROWTH FUND SAFECO EQUITY FUND
-------------------------------- --------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
------------ ------------ ------------ ------------
- - --(In Thousands, Except Per Share Amounts)-- 1995 1994 1995 1994
=======================================================================================================================
<S> <C> <C> <C> <C>
SHARES
Sales 14,006 28,734 20,359 38,169
Reinvestments 47 1,067 568 1,201
--------- --------- --------- ---------
14,053 29,801 20,927 39,370
Redemptions (14,572) (29,081) (12,775) (21,516)
--------- --------- --------- ---------
NET CHANGE (519) 720 8,152 17,854
========= ========= ========= =========
AMOUNTS
Sales $ 244,706 $ 564,076 $ 282,164 $ 518,200
Reinvestments 830 19,089 7,877 16,538
--------- --------- --------- ---------
245,536 583,165 290,041 534,738
Redemptions (255,230) (573,472) (176,537) (288,915)
--------- --------- --------- ---------
NET CHANGE $ (9,694) $ 9,693 $ 113,504 $ 245,823
========= ========= ========= =========
As of March 31, 1995
Shares Authorized Unlimited Unlimited
Par Value Per Share $ .001 $ .001
Paid in Capital $ 112,179 $ 478,156
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- 29 -
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
2. TRUST SHARES (CONTINUED)
<TABLE>
<CAPTION>
SAFECO INCOME FUND SAFECO NORTHWEST FUND
------------------------------- -------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
------------ ------------ ------------ ------------
- - --(In Thousands, Except Per Share Amounts)-- 1995 1994 1995 1994
======================================================================================================================
<S> <C> <C> <C> <C>
SHARES
Sales 787 1,323 219 5,148
Reinvestments 211 559 4 74
-------- -------- -------- --------
998 1,882 223 5,222
Redemptions (1,019) (2,244) (346) (5,546)
-------- -------- -------- --------
NET CHANGE (21) (362) (123) (324)
======== ======== ======== ========
AMOUNTS
Sales $ 13,432 $ 23,315 $ 2,707 $ 64,759
Reinvestments 3,615 9,648 43 921
-------- -------- -------- --------
17,047 32,963 2,750 65,680
Redemptions (17,259) (39,367) (4,278) (69,832)
-------- -------- -------- --------
NET CHANGE $ (212) $ (6,404) $ (1,528) $ (4,152)
======== ======== ======== ========
As of March 31, 1995
Shares Authorized Unlimited Unlimited
Par Value Per Share $ .001 $.001
Paid in Capital $170,468 $29,023
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- 30 -
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
3. ACCUMULATED UNDISTRIBUTED CAPITAL GAINS
The following funds had undistributed net capital gains for the six months
ending March 31, 1995:
<TABLE>
<S> <C>
Growth Fund $18,950,000
Equity Fund $13,873,000
Income Fund $ 6,458,000
Northwest Fund $ 604,000
</TABLE>
4. INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
SAFECO SAFECO SAFECO SAFECO
GROWTH EQUITY INCOME NORTHWEST
- - --(In Thousands)-- FUND FUND FUND FUND
=============================================================================================================
<S> <C> <C> <C> <C>
PURCHASES FOR THE SIX MONTHS ENDED MARCH 31, 1995 $ 46,803 $ 226,386 $ 26,742 $ 2,103
======== ========= ======== =======
SALES FOR THE SIX MONTHS ENDED MARCH 31, 1995 $ 65,318 $ 126,970 $ 27,815 $ 4,201
======== ========= ======== =======
UNREALIZED APPRECIATION (DEPRECIATION)
AT MARCH 31, 1995
Aggregate Gross Unrealized Appreciation for
Investment Securities in Which There is an
Excess of Value Over Identified Cost $ 34,946 $ 55,263 $ 27,529 $ 9,615
Aggregate Gross Unrealized Depreciation for
Investment Securities in Which There is an
Excess of Identified Cost Over Value (12,189) (10,374) (8,387) (3,326)
-------- --------- -------- -------
NET UNREALIZED APPRECIATION $ 22,757 $ 44,889 $ 19,142 $ 6,289
======== ======== ======== =======
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
- 31 -
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. INVESTMENTS IN AFFILIATES
Each of the companies listed below is an affiliated company of a Fund because
the Fund owned at least 5% of its voting securities during the six month period
ended March 31, 1995.
<TABLE>
<CAPTION>
SHARES AT SHARES AT MARKET VALUE
BEGINNING END MARCH 31,
SECURITY OF PERIOD ADDITIONS REDUCTIONS OF PERIOD DIVIDENDS 1995
====================================================================================================================
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
GROWTH
Speizman Industries, Inc. 165 -- -- 165 -- $ 740
Thorn Apple Valley, Inc. 313 -- 313 $44 6,025
EQUITY
Malan Realty Investors, Inc. 277 32 (90) 219 131 3,034
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
6. INVESTMENT ADVISORY FEES AND
OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEES. SAFECO Asset Management Company receives investment
advisory fees from the Funds. For the Growth, Equity, and Income Funds, the fee
is based on average daily net assets at the annual rate of 75/100 of one percent
on the first $100 million declining in three levels to 45/100 of one percent on
net assets over $500 million. For the Northwest Fund, the fee is based on
average daily net assets at the annual rate of 75/100 of one percent on the
first $250 million declining in three levels to 45/100 of one percent on net
assets over $750 million.
TRANSFER AGENT FEES. SAFECO Services Corporation receives shareholder
servicing fees.
NOTES PAYABLE AND INTEREST EXPENSE. The Funds may borrow money for temporary
purposes from SAFECO Corporation or its affiliates. Interest rates equivalent to
commercial bank interest rates are charged on loans over $100,000. No interest
is charged on loans under $100,000.
AFFILIATE OWNERSHIP. At March 31, 1995, SAFECO Insurance Company of America
("SAFECO Insurance"), a wholly owned subsidiary of SAFECO Corporation, owned
500,000 shares of the Northwest Fund.
DEFERRED ORGANIZATION EXPENSE. Costs related to the organization of the
SAFECO Northwest Fund have been deferred and are being amortized to operations
over a period of sixty months. These costs were advanced by SAFECO Asset
Management Company and are being reimbursed by the Fund over a period of not
more than the same time period. If any of the original seed money shares are
redeemed by SAFECO Insurance prior to the end of the amortization period, the
redemption proceeds will be reduced by a pro rata share of the unamortized
organization expense as of the date of redemption.
- 32 -
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO GROWTH FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ ----------------------------------------------------------------
1995 1994 1993 1992 1991 1990
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 17.37 $ 19.20 $ 13.98 $ 17.95 $ 11.14 $ 17.22
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) -- (0.02) (0.02) (0.01) 0.05 0.14
Net Realized and Unrealized
Gain (Loss) on Investments 0.90 0.78 5.39 (3.15) 7.77 (4.20)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.90 0.76 5.37 (3.16) 7.82 (4.06)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from Net Investment Income -- -- -- -- (0.05) (0.14)
Distributions from Capital Gains (0.11) (2.59) (0.15) (0.81) (0.96) (1.88)
-------- -------- -------- -------- -------- --------
Total Distributions (0.11) (2.59) (0.15) (0.81) (1.01) (2.02)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 18.16 $ 17.37 $ 19.20 $ 13.98 $ 17.95 $ 11.14
======== ======== ======== ======== ======== ========
TOTAL RETURN 5.18%* 3.88% 38.43% -17.83% 70.22% -23.67%
NET ASSETS AT END OF PERIOD (000'S OMITTED) $153,846 $156,108 $158,723 $127,897 $155,429 $59,164
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.06%** 0.95% 0.91% 0.91% 0.90% 1.01%
RATIO OF NET INCOME (LOSS) TO
AVERAGE NET ASSETS -0.05%** -0.12% -0.10% -0.10% 0.36% 0.88%
PORTFOLIO TURNOVER RATE 63.59%** 71.18% 57.19% 85.38% 49.86% 90.48%
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Annualized.
** Annualized.
- 33 -
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO EQUITY FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ ------------------------------------------------------------
1995 1994 1993 1992 1991 1990
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 13.89 $ 12.54 $ 9.53 $ 10.38 $ 8.43 $ 10.10
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.16 0.23 0.17 0.15 0.17 0.22
Net Realized and Unrealized
Gain (Loss) on Investments 0.37 1.83 3.79 (0.09) 2.37 (1.28)
-------- -------- -------- -------- ------- --------
Total from Investment Operations 0.53 2.06 3.96 0.06 2.54 (1.06)
-------- -------- -------- -------- ------- --------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.16) (0.23) (0.17) (0.15) (0.17) (0.22)
Distributions from Capital Gains (0.09) (0.48) (0.78) (0.76) (0.42) (0.39)
-------- -------- -------- -------- ------- --------
Total Distributions (0.25) (0.71) (0.95) (0.91) (0.59) (0.61)
-------- -------- -------- -------- ------- --------
NET ASSET VALUE AT END OF PERIOD $ 14.17 $ 13.89 $ 12.54 $ 9.53 $ 10.38 $ 8.43
======== ======== ======== ======= ======= ========
TOTAL RETURN 3.90%* 16.51% 41.77% 0.41% 30.39% -10.73%
NET ASSETS AT END OF PERIOD (000'S OMITTED) $536,930 $412,805 $148,894 $74,383 $71,586 $51,603
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.86%** 0.85% 0.94% 0.96% 0.98% 0.97%
RATIO OF NET INCOME TO
AVERAGE NET ASSETS 2.38%** 1.72% 1.50% 1.34% 1.70% 2.19%
PORTFOLIO TURNOVER RATE 56.11%** 33.33% 37.74% 39.88% 45.21% 51.01%
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Annualized.
** Annualized.
- 34 -
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO INCOME FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED SEPTEMBER 30
------------ -------------------------------------------------------------
1995 1994 1993 1992 1991 1990
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 17.25 $ 17.79 $ 16.27 $ 15.35 $ 12.89 $ 16.44
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.40 0.81 0.78 0.80 0.81 0.85
Net Realized and Unrealized
Gain (Loss) on Investments 0.53 (0.30) 1.52 0.96 2.53 (3.39)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.93 0.51 2.30 1.76 3.34 (2.54)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.40) (0.81) (0.78) (0.80) (0.83) (0.83)
Distributions from Capital Gains -- (0.24) -- (0.04) (0.05) (0.18)
-------- -------- -------- -------- -------- --------
Total Distributions (0.40) (1.05) (0.78) (0.84) (0.88) (1.01)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END OF PERIOD $ 17.78 $ 17.25 $ 17.79 $ 16.27 $ 15.35 $ 12.89
======== ======== ======== ======== ======== ========
TOTAL RETURN 5.50%* 2.98% 14.35% 11.75% 26.43% -16.06%
NET ASSETS AT END OF PERIOD (000'S OMITTED) $196,063 $190,610 $203,019 $181,582 $181,265 $170,153
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.89%** 0.86% 0.90% 0.90% 0.93% 0.92%
RATIO OF NET INCOME TO
AVERAGE NET ASSETS 4.67%** 4.59% 4.55% 5.06% 5.58% 5.59%
PORTFOLIO TURNOVER RATE 30.17%** 19.30% 20.74% 20.35% 22.25% 19.37%
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not Annualized.
** Annualized.
- 35 -
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7. FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
SAFECO NORTHWEST FUND
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX FOR THE NINE OCTOBER 18, 1990
MONTHS YEAR MONTHS (COMMENCEMENT)
ENDED ENDED ENDED FOR THE YEAR OF OPERATIONS)
MARCH 31 SEPT. 30 SEPT. 30 ENDED DEC. 31 TO DEC. 31
----------------------------------------------------------------------------------
1995 1994 1993 1992 1991+ 1990++
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $ 12.59 $ 12.34 $ 12.59 $ 11.37 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.02 0.04 0.02 0.06 0.19 0.11
Net Realized and Unrealized
Gain (Loss) on Investments 0.40 0.59 (0.25) 1.53 1.44 --
------- ------ ------- ------- ------- -------
Total from Investment Operations 0.42 0.63 (0.23) 1.59 1.63 0.11
------- ------ ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.02) (0.04) (0.02) (0.06) (0.19) (0.11)
Distributions from Capital Gains -- (0.34) -- (0.31) (0.07)
------- ------ ------- ------- ------- -------
Total Distributions (0.02) (0.38) (0.02) (0.37) (0.26) (0.11)
------- ------ ------- ------- ------- -------
NET ASSET VALUE AT END OF PERIOD $ 12.99 $ 12.59 $ 12.34 $ 12.59 $ 11.37 $ 10.
======= ======= ======= ======= ======= =======
TOTAL RETURN 3.34%** 5.19% -1.86%** 14.08% 14.93%- N/A
NET ASSETS AT END OF PERIOD (000'S OMITTED) $35,915 $36,383 $39,631 $40,402 $26,434 $ 5,000
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.10%* 1.06% 1.11%* 1.11% 1.24% 1.43%*
RATIO OF NET INCOME TO
AVERAGE NET ASSETS 0.32%* 0.33% 0.18%* 0.55% 1.26% 5.47%*
PORTFOLIO TURNOVER RATE 12.13%* 18.46% 14.05%* 33.34% 27.71% None
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Includes $.06 per share of net investment income earned on the initial seed
money investment prior to February 7, 1991. The shares were first offered to
the public on February 7, 1991, at $10.06 per share.
++ These per share data and ratios relate to the performance of the initial
seed money investment of SAFECO Insurance Company of America only, since
Fund shares were not yet available to the public.
** Not annualized.
* Annualized.
- - - Total return from February 7, 1991, (initial public offering) to December
31, 1991, not annualized.
- 36 -
<PAGE> 39
SAFECO FAMILY OF FUNDS
STABILITY OF PRINCIPAL
SAFECO Money Market Fund
SAFECO Tax-Free Money Market Fund
TAXABLE BOND INCOME
SAFECO Intermediate-Term U.S. Treasury Fund
SAFECO GNMA Fund
SAFECO High-Yield Bond Fund
TAX-FREE BOND INCOME
SAFECO Intermediate-Term Municipal Bond Fund
SAFECO Insured Municipal Bond Fund
SAFECO Municipal Bond Fund
SAFECO California Tax-Free Income Fund
SAFECO Washington State Municpal Bond Fund
HIGH CURRENT INCOME WITH LONG-TERM GROWTH
SAFECO Income Fund
LONG-TERM GROWTH
SAFECO Growth Fund
SAFECO Equity Fund
SAFECO Northwest Fund
FOR MORE COMPLETE INFORMATION ON ANY SAFECO MUTUAL FUND, INCLUDING MANAGEMENT
FEES AND EXPENSES, CALL OR WRITE FOR A FREE PROSPECTUS. PLEASE READ IT CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
- 37 -
<PAGE> 40
SAFECO STOCK FUNDS
BOARD OF TRUSTEES
Boh A. Dickey, Chairman
Barbara J. Dingfield
Richard W. Hubbard
Richard E. Lundgren
L.D. McClean
Larry L. Pinnt
John W. Schneider
OFFICERS
David F. Hill, President
Ronald L. Spaulding,
Vice President and Treasurer
Neal A. Fuller,
Vice President and Controller
INVESTMENT ADVISER
SAFECO Asset
Management Company
DISTRIBUTOR
SAFECO Securities, Inc.
TRANSFER AGENT
SAFECO Services Corporation
CUSTODIAN
U.S. Bank of Washington, N.A.
GMF 659 5/95
[LOGO]Printed on Recycled Paper
Bulk Rate
U.S. Postage
P A I D
Permit No. 2405
Seattle, WA
This report must be preceded or accompanied by a current prospectus.
Registered trademark of SAFECO Corporation.
